With the new year fast approaching I am starting to think about getting my portfolio ready for 2020 and beyond. My annual review is not about fire fighting, it is a chance to make sure my long-term plan is being followed and broad themes are being addressed.
For example, each year I nudge my SIPP portfolio towards my retirement goal of 60/40 in favour of stocks. I also want to make sure that any biases I have are not affecting my portfolio, review the long-term performance of my holdings, and think about what next year might be like.
No place like home
For individual stock picks, I look to the UK market. For one thing, it is simply easier to hold UK stocks in a UK ISA or SIPP. There are no additional forms to fill out, I don’t have to worry about exchange rates or reclaiming taxes on pound and pence prices and dividends, and yes, I feel more on top of UK markets as I live here.
UK equities are, however, just a small part of the global equity market portfolio which has around 55% in US stocks, 9.6% in emerging markets, 11.7% in developed Pacific, and 22.8% in developed Europe and the Middle East, with the UK making up a little over 5% on its own.
If you have all of your money in UK equities you should be comfortable saying that UK stocks will outperform every other market. If you are not then putting something into a fund that tracks the MSCI World ex UK Index is something to consider. I fight against my home country bias and will be making sure for 2020 I have enough invested in foreign markets.
Take out the trash
Any disasters should have been dealt with as they occurred, but there will be other stocks that have been given a chance but have not recovered. Now is the time I will ask myself if I truly believe there is a case for a turnaround, or am I just averse to taking a loss?
I will also be checking my fund holdings to see if they are still beating their benchmarks, if actively managed, or matching them, if they are passive. One year of underperformance is not enough for me to dump the fund unless it’s significant, accompanied by a manager change, or the risk profile has changed, but two years gets my attention and three means I am selling. SIPP or ISA providers have the information needed for monitoring funds you own and choosing new ones.
The year ahead
I will take the time to sit down and think about big events that may play out next year, and decide if I want to invest any differently.
I am going to lean away from utility stocks because of the risk of a Labour government. I am going to add a little more into funds that are not invested in European or UK stocks because Brexit is not resolved and Germany is slowing down. I will be adding a little more into my gold and bond funds because I am concerned about a recession.
I might be wrong, so I keep the changes to my long-term plan small. I also write down what I did and why; it will make for interesting reading next year.
